Car Insurance Basics

November 12, 2014

The motor insurance proposal form is usually the first step in the establishment of an insurance contract between an insurance provider and a client. The form is designed to capture the details of the client so that underwriters can determine the appropriate premiums for the cover sought. It is important to understand why insurance companies require you to fill the proposal form, and how they use it because it plays a significant role in various aspects of your cover.

A proposal form is not a policy document

The proposal form can be characterised as an application form. This form does not constitute the policy that you will receive from the insurance company. In this regard, be careful to distinguish between the information contained in the proposal form from that contained in the policy document. Filling a car insurance proposal form is merely telling the insurance company that you want their cover, and in turn, they prepare an invoice for you.

Lying on the proposal form can invalidate your insurance

While the proposal form is not the actual policy document, it is nonetheless an important part of acquiring insurance. The insurance company relies on it to give you the cover you would like to have. As such, any information you withhold that may have a material effect on the decision of the insurance company to cover can come back to haunt you. For instance, if you insure your car as a private vehicle and then it is involved in an accident while undertaking commercial activities, the insurance company can invalidate your claim. It is important to make proper declarations in the proposal form in order to eliminate the possibility of your claims being denied in the future.

The proposal form is a data collection

The main purpose of the proposal form is to collect information from you so that the insurance company can make a decision regarding whether to cover you. The details captured by the proposal form include your personal details (name, residence, age, etc), vehicle details (model, engine capacity, year of manufacture, etc) your insurance history, and the cover you would like to buy.

The proposal form is used to invoice you

Car Insurance companies use the proposal form to prepare an invoice for you based on your risk profile and the type of cover you need. This further explains why you need to be truthful when filling a proposal form. Auto Insurance underwriters use the information presented in the proposal form to calculate the premiums you should be charged.

The proposal form will be used to determine whether your claims should be honoured

If you make a claim within the validity of your current insurance, the auto insurance company will look at you proposal form to determine whether you claim is valid, and is in line with your policy. If you give inaccurate or inadequate information in the proposal form, the motor insurance company may give you a hard time when processing your claim.